Kenya: Co-operative Bank’s first quarter profit jumps 69% to Sh5.8bn

Co-operative Bank grew its net income by 68.8% in the first quarter ended March on a surge in non-interest income. The lender made a net profit of Sh5.8 billion in the review period, up from Sh3.4 billion the year before.

Non-interest income, including fees and commissions, rose 41.6% to Sh6.4 billion. Total interest income increased 4.1% to Sh14 billion, mainly due to higher income from investment in government fixed-income securities.

Co-operative Bank increased its purchases of treasuries by 10.3% to Sh183.3 billion. Its loan book meanwhile expanded 8.8% to Sh324.4 billion.

Besides the sharp rise in non-interest income, Co-op Bank also benefitted from reduced provisions for bad loans.

The amount set aside to absorb the non-performing loans fell 32.3% to Sh1.5 billion, contributing to total operating expenses declining 2.4% to Sh9 billion.

The stock of gross defaults also dropped 4.8% to Sh49.4 billion, signalling an improved quality of the loan book.

The ongoing economic recovery and the easing of the Covid-19 pandemic have strengthened the financial position of borrowers besides lifting the value of assets used as collateral such as properties.

Co-operative Bank’s new subsidiary –Kingdom Bank— contributed to the group’s consolidated earnings after its net profit increased 57.2% to Sh199.2 million in the first quarter.

Co-operative Bank acquired a 90% stake in the subsidiary in August 2020 for Sh1 billion in a rescue deal after the original shareholders balked at providing additional capital to the institution which was in losses.

The acquisition was part of Co-operative Bank’s strategy of growing in the Kenyan market where it believes opportunities are yet to be exhausted. The bank’s only foreign operation is in South Sudan.

The lender is opening seven new branches in the country this year, a move that will raise its total distribution network to 200.

Co-operative Bank is among the lenders that posted double-digit earnings growth in the quarter under review, a signal that Kenyan banks could set new profit records this year after bumper profits last year attributed to the recovery of the economy from the Covid-19 pandemic.

Infections and deaths from the respiratory disease have slowed down, leading to the easing of travel and other restrictions. This has revived economic activities and brightened the outlook, with banks benefitting from improved loan repayments.

Borrowers, for instance, have resumed normal payments on 90% of the Sh1.6 trillion loans that were restructured in the wake of the pandemic in early 2020.